DWP response to consultation on transfer values
On 18 January 2007 the Department for Work and Pensions (DWP) published its response to last year’s consultation on the calculation of transfer values. Broadly speaking, no substantive changes have been proposed to the calculation of transfer values. The government has focused primarily on maintaining the viability of pension schemes, by retaining the status quo in terms of balancing the interest of the transferring member, the members remaining in the scheme and the cost to the employer of maintaining the scheme.
Pensions Regulator and HMRC publish guidance on the payment of inducements to Pension Scheme Members
On 24 January 2007 the Pensions Regulator and HM Revenue and Customs (HMRC) delivered guidance on financial inducement offers made by employers to employees to encourage them to transfer out of a final salary scheme or accept reduced benefits. Typically, such inducement offers take the form of enhanced transfer values or direct cash payments to members or a combination of both.
The guidance on inducement offers advises employers and trustees to ensure that scheme members are given proper advice and sufficient information to enable them to fully understand the implications of transferring out of final salary schemes or accepting rule changes in return for financial inducements. The guidance also contains a checklist of points that inducement offers should include. At the same time, HMRC announced that cash inducements paid directly to members would be subject to income tax and national insurance.
Two new TPR codes of practice in force: Internal controls guidance
On 2 February 2006, the Pensions Regulator published guidance on the framework for establishing internal controls.
The guidance, to be read in conjunction with the Pension Regulator’s Code of Practice 09 ‘Internal Controls’, is designed to assist all trustees, and in particular those of smaller schemes, in implementing a robust risk-management structure and complying with the requirement to have internal controls in place for their scheme.
It provides an overview of a risk management framework and gives step by step examples of the activities that need to be carried out and the outcomes scheme trustees should expect when completing each stage of the cycle.
The guidance also provides examples of a risk register, types of risks and highlights the internal controls that may apply.
Modification of subsisting rights
The Pensions Regulator’s code of practice on the modification of subsisting rights has now come into effect.
The code explains that, under the Pensions Act 2004, amendments to scheme rules which might adversely affect members' benefits or pensions in payment, or would change benefits to money purchase benefits, require either the consent of scheme members or an actuarial equivalence certificate.
Guidance is provided on:
- the schemes and the types of modification to which the legislation applies;
- trustees' duties and responsibilities; and
- the Regulator’s expectations and powers to intervene.
European court opinion delivers blow to pension protesters
The legal success of a landmark legal challenge brought before the European Court by the retirement organisation Heyday has been cast in doubt by the ECJ advocate-general’s opinion in a Spanish case, brought on similar grounds. Heyday's case challenges the right of employers under the age discrimination legislation to force employees into retirement on reaching age 65. The advocate-general has delivered an opinion that the principle of non-discrimination on grounds of age, set out in Article 2(1) of the Equal Treatment Framework Directive (2000/78/EC), does not apply to national laws which set retirement ages. He added that even if the Directive did apply to such national laws, they would not necessarily be unlawful, as they serve a "legitimate public interest aim".
High Court victory for pensioners
Four pensioners who lost all or part of their company pensions have won their High Court case against the government. The Court held that the government acted unlawfully in rejecting the Parliamentary Ombudsman's report that compensation should be paid to the victims and Judge David Bean directed the government to reconsider its position.
The Court decision does not, however, oblige the government to compensate an estimated 85,000 people for their loss.
A spokeswoman for the Department for Work and Pensions said: "The government wishes to consider the implications of this complex judgment, both in relation to this specific case and more widely across government."